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Bayer's sweetened $65bn bid for Monsanto fails to convince markets

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Markets raised, a little, the chances of Bayer acquiring US-based Monsanto, the world's top seeds producer, after the German company said the groups were in "advanced" talks over a sweetened deal.

Bayer, the Leverkusen-based chemicals conglomerate, said in a statement overnight that it had, for a second time, raised its offer for Monsanto, saying "would be prepared" to pay $127.50 per share

That proposal, valuing Monsanto at more than $65bn, represented an improvement on the $125 per share previously offered, but which the US company rejected in July as "financially inadequate".

Bayer said that it was now "in advanced negotiations with Monsanto", if adding that "key terms and conditions have not yet been agreed".

'Constructive negotiations'

In a separate statement, Monsanto, flagging the upgraded $127.50-per-share offer, "confirmed it has been engaged in constructive negotiations with Bayer".

Monsanto added that it was "continuing these conversations" as it weighed up Bayer's approach, besides proposals from unnamed "other parties", and what the US group termed "other strategic alternatives".

Monsanto said assessments were being made "to determine if a transaction in the best interests of its shareowners can be realised".

Share reaction

However, the immediate stock market reaction was to lift the Monsanto share price in line with the increase in the Bayer offer, and the shares turned lower in late deals in New York to stand at $105.99.

That stock price, besides being down 1.4% on the day, represents a relatively large discount, of nearly 17%, to the Bayer offer, implying notable uncertainty remains that a deal will be consummated.

In Frankfurt, Bayer shares gained 1.8% to close at E95.92.

Bigger bid needed?

Indeed, many investors believe that Bayer will need to sweeten its bid further to win Monsanto's agreement to a takeover.

Rheinische Post, the German daily newspaper, reported late on Monday that an offer of $130 per share may be needed to consummate a deal with Monsanto "in a swift and friendly" manner.

Analysts at broker Baader Helvea said it believed a bid of $130-135 per share was needed "before Monsanto comes to the table".

By Mike Verdin

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